The loans that got us into this mess were generally the first to fall. Variable rate mortgages written without documentation for people with sketchy credit histories shocked nobody as their slide became an avalanche. But, the good stuff is starting to follow. An increasing amount of fixed rate mortgages offered to borrowers with solid credit histories are feeling their ways to foreclosure. Blame unemployment for this one. When people can't work, it gets pretty hard to pay the mortgage.

Fixed rate, high quality mortgages had a foreclosure a year ago. Last quarter, it jumped to 33%, according to a Mortgage Bankers Association report. As this happened, the amount of homeowners behind on their payments or in foreclosure just set another record high ... for the ninth month in a row. Subprime mortgages are headed in the other direction. Low quality adjustable rate mortgages are now 16% of new foreclosures -- compared to 35% last year. And, more than 18% of Federal Housing Administration loans are anywhere from one payment behind to in foreclosure, with California, Nevada, Arizona and Florida worst off: together, they accounted for 44% of new foreclosures.

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Are things getting better on the mortgage front? From some of the recent data just published the answer is no.

In July, foreclosure filings, defined as a default notice, bank repossession, or auction sale, were up 7%. and 32% over a year earlier. This is according to Realty Trac's U.S. Foreclosure Market Report. One in every 355 homeowners had received a foreclosure filing.

If you're wondering why Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) have been bombarded by selling pressure today, look no further than this Wall Street Journal article (subscription required). The newspaper reports that the Mortgage Bankers Association (MBA) is pushing for the government to split up Fannie and Freddie "into several smaller privately held companies that would issue mortgage related securities carrying an explicit government guarantee."

Under the terms of the proposal, Fannie and Freddie's offspring would no longer be permitted to sit on massive mortgage portfolios. Additionally, all mortgage-backed securities created by the duo would be backed by a federal insurance fund, replacing the rather abstract implied government guarantee that's currently in place.

There's good news and bad news about the mortgage market. The good news is that you can get your information from a variety of sources. The bad news? You really need to get your news from a variety of sources.

Conflicting reports Wednesday suggest that mortgage applications are up -- and down.

Over the past few years, the mortgage business has been virtually dead -- that is, until recently.

Why? The key driver, of course, is the plunge in interest rates (keep in mind that the Federal Reserve plans to buy up $500 billion in mortgages). In fact, you can get a fixed-rate mortgage loan for less than 5%. You'd have to go back to the 1950s to see those levels.

But there's a caveat: the mortgage growth is not for purchasing houses; instead, we are seeing a surge of refinancing activities. But, hey, this is a start, right?

In the first week of 2009, we saw the biggest jump in mortgage applications since 2003 (this is according to a report from the Mortgage Bankers Association). There was a 15.8% jump in the index.

Interestingly enough, it's still fairly difficult to secure a mortgage, especially as underwriting standards have increased. Basically, a large number of consumers have minimal levels of home equity as well as damaged credit.

Now, Fannie Mae is in the process of implementing new programs for troubled borrowers, which should help. What's more, Congress may introduce some new programs.

However, it is critical that housing prices increase again, which means the U.S. economy will need to once again get back on track.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

More bad news on the struggling housing market today, as the Mortgage Bankers Association announced that last week mortgage applications dropped to an eight year low. This is another sign that people are not ready to jump back into the housing market just yet.

As we all know, home prices have been falling steadily over the past year, and we are all waiting to see the point where buyers decide that the price is right to jump back into the market. So far, that is just not happening. According to today's report, mortgage volume was 44% lower last week than the same period last year.

Refinancing applications were down 23.5% last week, and more importantly, mortgage applications to purchase new homes fell 10.9% from the previous week. The last time weekly volume was this low was all the way back in December 2000.

During last night's presidential debate (which he lost badly) Republican John McCain vowed that if elected he would order the U.S. Treasury Department to purchase "bad mortgages" to help people avoid foreclosure. It's an idea that deserves consideration.

According to Bloomberg News, the McCain campaign estimates that it would cost $300 billion, some of which would be diverted from the $700 billion rescue of Wall Street. The Arizona senator did not provide specifics during the debate. Democrat Barack Obama proposed a similar idea during a press conference last month, according to Bloomberg. These proposals raise many questions.

First of all, can the government afford to purchase both mortgages and mortgage-backed securities? How will the government determine who gets help? Many people bought homes they could not afford because of criminally lax lending standards at some banks. Others were hoodwinked by unscrupulous mortgage brokers into taking adjustable-rate mortgages when they qualified for cheaper fixed-rate 30-year loans. These individuals are the most deserving of the government's help. Officials should try and help other distressed mortgagers provided that they can afford their properties. Otherwise, they should be given assistance to find affordable housing.

Mortgage applications decreased 9.3% for the week ended June 20, 2008, the Mortgage Bankers Association announced Wednesday.

The Mortgage Bankers Association's composite index of applications declined to 461.3, on a seasonally-adjusted basis from last week's 508.4. Compared to a year ago, the composite index is down 25.3% on an unadjusted basis.

Also, the Refinance Index decreased 12.1% to 1,212.2 from 1,378.6 the previous week and the seasonally adjusted Purchase Index decreased 7.4% to 333.4 from 360.2 one week earlier.

Mortgage rates dip

Meanwhile, the average rate for a 30-year fixed loan decreased slightly to 6.39% from 6.57% the prior week. The average rate for a 15-year fixed mortgage decreased to 5.95% from 6.14%.

Mortgage applications decreased last week, as an increase borrowing costs discouraged both purchase and mortgage refinancing activity, the Mortgage Bankers Association announced Wednesday.

The Mortgage Bankers Association's composite index of applications declined 14.2% on a seasonally-adjusted basis to 637.6 from last week's 734.4.

The Refinance Index decreased 20.2% to 2,286.3 from 2,866.0 the previous week and the seasonally adjusted Purchase Index decreased 6.4% to 357.3 from 381.6 one week earlier.

Rates rise

Meanwhile, the average rate for a 30-year fixed loan rose to 6.04% from 5.74% the prior week. The average rate for a 15-year fixed mortgage increased to 5.60% from 5.27%.

Every economic problem or setback seeks a scapegoat -- someone decision makers, pundits, and others can blame (unjustifiably) for a turn of events that's preferred by virtually no one.

The criticism is parsimonious, unfair, and injurious -- but that hasn't seemed to stop practitioners from venturing forth with charges that are often tenuous, if not absurd.

Scapegoat-of-the-moment

The ever-incisive FT columnist Martin Wolf points out that former U.S. Federal Reserve Chairman Alan Greenspan is being cast as 'the villain' for the housing bubble, its bursting, and consequent impact on credit/bond markets and credit availability. All of it is unfair, Wolf notes, and he provides ample evidence to support his point.

Chiefly: Greenspan did not create low, long-term interest rates. The low, long-term rates were caused primarily by a global savings glut, Wolf said. (See: China's savings rate.) The Fed had little control over this -- Greenspan even creatively and accurately referred to the Fed's inability to force long-term rates higher despite the Fed's best effort: he called it "a conundrum." Given the surplus savings sloshing around in global markets at that time, among other factors, those low rates would have occurred regardless of who was Fed chairman.

The Washington Post reports that the Mortgage Bankers Association (MBA) is getting what it feels is a raw deal on a mortgage for its Washington headquarters. Boo hoo! The MBA is buying a building there for $100 million, but is paying a higher interest rate on its mortgage as its income declines and the leasing market is slow leaving it with no tenants for the building.

This couldn't have happened to a nicer association. After all, the MBA encouraged people to take out subprime mortgages -- many of which went bad. Despite the Fed's rate cuts from 5.25% to 2.25% mortgage interest rates are up thanks to bankers' fear of lending. And the resulting economic slowdown is making it harder for the MBA to find tenants for its building.

Let's survey the damage to the MBA. First, its membership has declined 17% in the last year and it predicts a 10% to 15% decline in revenue as a result. Bankers are making the MBA put up about 10% more of a down payment than it had planned and the lack of tenants has moved its lender to increase the financing costs slightly. Perhaps there's justice in the universe. If not, at least MBA's predicament is giving it a taste of its own medicine.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Mortgage applications decreased last week, as an increase in borrowing costs discouraged mortgage refinancing activity, the Mortgage Bankers Association announced Wednesday.

The Mortgage Bankers Association's composite index of applications declined 1.9% on a seasonally-adjusted basis to 671.7 from last week's 684.9.

The Refinance Index decreased 4.7% to 2,448.2 from 2569.0 the previous week and the seasonally adjusted Purchase Index increased 1.6% to 368.8 from 363.1 one week earlier.

Mortgage rates rise

Meanwhile, the average rate for a 30-year fixed loan rose to 6.37% from 5.98% the prior week; 30-year rates are at five-month high. The average rate for a 15-year fixed mortgage increased to 5.72% from 5.26%.

Also, the share of applications that involved a refinance declined to 50.6% from 52%.

Economic Analysis: A large increase in conventional mortgage rates -- the average rate rose about 40 basis points in one week. The U.S. Federal Reserve has cut benchmark, short-term interest rates by 225 basis points, but mortgage rates have not fallen, they've risen. That's a tell-tale sign that banks remain concerned about their portfolios and about sluggish housing market conditions. For the housing sector to regain its sea legs, rates must move toward the lower-end of their 10-year range, which would increase housing demand by lowering monthly payments for purchases.

U.S. home foreclosures reached another record high in Q4 2007, the Mortgage Bankers Association announced.

A record 0.83% of mortgages were entering the foreclosure process in the last three months of 2007, compared to 0.54% for the same period in 2006, the MBA announced.

In addition, the delinquency rate reached 5.82% in Q4 2007 -- the highest level since 1985 -- up from 4.95% in Q4 2006.

Mortgage applications decreased for the first week in six on a decline in both purchase and refinance activity, the Mortgage Bankers Association said today.

The Mortgage Bankers Association's composite index decreased 2.1% last week to 1063.5 from 1086.6 a week earlier.

The refinance index decreased 3% to 4901.5 from 5054.0 the previous week and the seasonally adjusted purchase index decreased 0.3% to 403.9 from 405.3 one week earlier.

Meanwhile, the average rate for a 30-year fixed loan rose to 5.72% from 5.61% the prior week. The average rate for a 15-year fixed mortgage increased to 5.18% from 5.09%.

Economist Steve Affinito said mortgage rates remain relatively low, but mortgage activity is likely to remain sluggish for several quarters, as the sector resumes a more sustainable activity pace.

"Rates remain attractive, but with tougher underwriting standards and with just fewer people in the market for homes, mortgage activity will reflect the sector's doldrums through at least Q3 of this year," Affinito said. "And I must underscore it's a borrower market that favors applicants with good credit histories."

U.S. mortgage applications increased for the fifth week in a row, boosted by an increase in mortgage applications for purchases, the Mortgage Bankers Association announced Wednesday in a statement.

The Mortgage Bankers Association's index of applications to buy a home or refinance a loan increased 3% last week to 1086.6 -- it's highest level since March 2004. The group's purchase index increased 12% and the refinancing gauge fell 1%.

Meanwhile, the average rate for a 30-year fixed loan rose to 5.61% from 5.60% the prior week. Rates have declined about one-half percentage point since the end of 2007. The average rate for a 15-year fixed mortgage increased to 5.09% from 5.04%.